In Scullion v Bank of Scotland (t/a Colleys)  EWCA Civ 693, the English Court of Appeal considered whether a valuer who had prepared a valuation report for a lender owed a duty of care to the purchaser of the property if that purchaser was “buying to let”.
Facts and Decision of the High Court
Mr Scullion entered into an arrangement with a property investment company ("POD") in terms of which Mr Scullion would ultimately purchase flats on a buy-to-let basis and POD would find tenants for those flats. Mr Scullion completed a mortgage application form and provided a cheque to a mortgage broker, which included a sum to pay for a valuation of the relevant flat for the benefit of the proposed lender. A valuation report was issued in the standard form of a company called Mortgages plc on behalf of Colleys. The report identified Mr Scullion as "Applicant" and recorded both the capital and rental values for the property.
Mr Scullion raised court proceedings on the basis that, amongst other things, he relied on the capital and rental valuations when deciding to purchase the property, Colleys owed him a duty of care when preparing the report, the capital and rental valuations of the property had been negligently high and he was therefore entitled to damages. The High Court decided that Mr Scullion was not entitled to damages for the negligently high capital value as he had not suffered any loss, but that he was entitled to damages attributable to the negligently high rental value. Colleys appealed this decision.
Decision of the Court of Appeal
After it was established that Mr Scullion had relied on Colleys' report, the fundamental question was did Colleys owe Mr Scullion a duty of care when submitting the report? In determining this issue, the Court stated that Mr Scullion needed to establish forseeability of damage, a sufficient degree of "proximity" between him and Colleys, and that it would be fair, just and reasonable to impose on Colleys a duty of care to him. The Court of Appeal decided that it was not sufficiently clear that it would have been foreseeable to Colleys that Mr Scullion would rely on the report.
The approach adopted by the Court was that a buy-to-let purchaser should obtain his own advice in relation to both the capital and rental values of a property. Accordingly, there was no likelihood that a purchaser, buying a property for the purpose of letting it out, would rely on a valuation provided to the lender, and therefore Colleys did not owe a duty of care to Mr Scullion. The appeal was therefore allowed.
In what may be controversial reasoning, Lord Neuberger MR was of the view that the fact that the transaction was essentially commercial in nature had some bearing. He said that, in general, buy-to-let purchasers were likely to be richer than people who buy to occupy, and can therefore be regarded as more likely to obtain, and more able to afford, an independent valuation or survey. He even went as far as to say that "commercial purchasers of low to middle value residential properties, such as those buying to let, can properly be regarded as less deserving of protection by the common law against the risk of negligence than those buying to occupy as their residence".
As this decision will almost certainly close doors to similar claims that have surfaced out of the buy-to-let craze and subsequent property market collapse, buy-to-let purchasers must ensure that they receive independent valuation advice.